In July 2000 we reported reaction to Delaware’s new law which allows corporations to hold shareholder meetings solely in cyberspace. Karen Hampton of Ford said webcasting of meetings will increase. Charles Elson, of the Center for Corporate Governance at the University of Delaware, indicated he likes to “see people eye-to-eye. Yet the world is changing.” Larry Hamermesh, a law professor at Widener University said meetings could get out of control “if you have 5,000 people online who all want to be heard.”
Many seem to miss the point. I don’t know of anyone who opposes Internet broadcasting of the meetings or voting online. Of course it’s easier for shareholders to attend online and all companies should facilitate access. The problem isn’t that meetings will get “out of control.” By meeting solely in cyberspace it will be much easier for management to ensure there are no unexpected or embarrassing questions, no surprises. When 5,000 shareholders online want to be heard, someone will need to select which questions will be addressed. Prescreening and prescripting become much more likely. Management will be more in control of the process than ever before. In 2010, as more companies ramp up toward virtual meetings, we finally seem to be grappling with some of the issues.
Also ten years ago, we reported that the Investment Company Institute is paid by companies in the industry. Half of the dues come out of shareholders’ pockets. Yet, 39 of the 45 members of ICI’s governing board work for fund-management companies. The other six are “independent directors” of member funds. Individual investors are being “taxed” but we have no representation. In 2010 the picture remains much the same. Take a look at the current ICI board and tell me who represents individual investors?
Five years ago, in July 2005, I brought reader attention to James McConvill’s The False Promise of Pay for Performance: Embracing a Positive Model of the Company Executive, largely a critique of Bebchuk and Fried’s Pay Without Performance. Bebchuk and Fried ask how we can improve that link, while McConvill is more focused on increasing executive productivity through other means. Both areas warrant attention. Even though we know a decision may be wrong, we tend to go along with the majority to stay in their good graces, resulting in a “reputational cascade.” How we are socialized and the words we use have real world impacts. Do we really want to reinforce the notion that CEOs should be primarily driven by the acquisition of personal wealth? Placing too much emphasis on external rewards, such as pay, may have the effect of diminishing internal incentives to do our best. McConvill’s research finds a stronger correlation between democracy and happiness than wealth and happiness.
We also reported that President Bush’s nominee to head the SEC, Congressman Chris Cox, has among the worst anti-consumer records in Congress. As a private attorney, Cox helped William Cooper peddle his Ponzi scheme to the public, costing small investors as much as $130 million. The US Senate Banking Committee is holding a 7/26/05 confirmation hearings on Cox. Cooper went to jail; Cox went to Congress. Ask your Senator to subpoena Cooper and Cox’s billing records to find out what Cox really did or didn’t do for Cooper. How would the world of finance changed had he not been confirmed?
Five years ago, we also noted CII’s support for changes that would “presumptively provide for the election of directors by a majority of votes cast for and against, unless otherwise provided in the certificate of incorporation or the bylaws.” “The benefits of this change are many: it democratizes the corporate electoral process; it puts real voting power in hands of investors; and it results in minimal disruption to corporate affairs—it simply makes boards representative of shareowners.” Five years later we’re still fighting for majority vote on a company by company basis.
Also five years ago, Institutional Shareholder Services, the nation’s largest proxy advisory firm, has reportedly agreed to pay more than $10 million to acquire the Investor Responsibility Research Center, which was founded in 1972, has been struggling to compete since becoming a for-profit entity four years ago.